Palma bought properties from Christian Brothers affiliate

Months after last year's bankruptcy filings by two prominent Catholic organizations, the real estate arm of one of them sold two Salinas properties to Palma High School, county records show.

The transfer of the West Acacia Street lots, which include two single-story houses, has plaintiffs' attorneys asking whether the sale coincided with the hunt for assets by abuse victims seeking restitution in the massive Christian Brothers' bankruptcy cases.

"The timing is very interesting," said Michael Pfau, a Seattle attorney involved in the cases.

"What was the purpose of the transfer?" he asked. "We're going to scrutinize it in light of the national bankruptcy and in light of claims coming forward in multiple states. The question is, is that an effort to keep those assets from being pulled into the bankruptcy case?"

Transferring assets in an attempt to hide them from creditors is a crime, although proving an intent to defraud can be difficult.

Attorneys representing the Salinas school say the transfer from Illinois-based Westcourt Corp., an affiliate of one of the bankrupt groups, was a legitimate sale.

"Palma School and its corporate entity paid fair market value for the lots in question, and it's part of an expansion program that the school is looking to engage in downstream," said Dick Hanson, a Portland, Ore., attorney who is representing Palma in an abuse lawsuit filed in Seattle.

Palma first bought the properties — at 255 and 263 W. Acacia St., next to the high school's campus — in 2001 and 2002.

In December 2003, Palma sold the properties to Westcourt, an out-of-state corporation doing business in California. Its registered agent was Brother Patrick Dunne, president of Palma.

A registered agent accepts legal documents on behalf of a corporation, but does not necessarily work for the company or have financial ties to it.

"Westcourt is a nonprofit that was established (for) the housing for the Christian Brothers in their various locations around the country," Hanson said.

Monterey County records show that Palma sold the Acacia properties to Westcourt for $800,000.

Westcourt's Chicago-area office addresses have, over the years, been identical to those used by the Christian Brothers of Ireland Inc., one of the two Catholic groups that filed for Chapter 11 bankruptcy last year in the face of widespread sex abuse lawsuits.

Westcourt is the name of the birthplace in Ireland of the Christian Brothers' founder, Edmund Rice.

The sale date to Westcourt by Palma was Dec. 19, 2003, coincidentally the same day a woman filed an abuse lawsuit against the Diocese of Monterey.

During that month, a flurry of lawsuits were filed all over the state after California designated the end of the year as the cutoff for filing abuse claims under a temporarily expanded statute of limitations.

"It's a rather amazing coincidence," Pfau said. "It's remarkable that the transfer matches up with the deadline to file abuse suits. It's amazing."

Nearly eight years later, Westcourt sold the properties back to Palma on Aug. 26, 2011 — four months after the Christian Brothers' bankruptcy filing.

The Christian Brothers' assets have yet to be listed or verified by the courts and are still being investigated by lawyers, such as Pfau, who represent alleged abuse victims.

Palma spokesman Kevin Elliott said in an emailed statement that all properties acquired by Palma undergo a fair-market appraisal by a local bank.

In fact, Westcourt took a loss on the resale to Palma, not surprising given widespread drops in the real estate market. County records indicate Palma paid $599,000 to get its properties back. The school financed the purchases with mortgages totaling $389,350, the records show.

Palma's corporate entity, The Christian Brothers Institute of California, "sold those two Acacia Street properties to Westcourt in 2003 for fair market value," Palma's statement said. "Owning the properties enabled Westcourt to provide appropriate housing for Christian Brothers serving at the school or in residence in Salinas."

Elliott added that the transactions were transparent and that "the net assets of Palma would not change" because of the sales.

Palma officials insist the school's assets are in no way at risk under the pending bankruptcy claims.

New York properties

Since declaring themselves insolvent last year, the Christian Brothers have tried to sell several New York school properties to the schools themselves — a move plaintiffs compare to the recent Palma sales.

In the New York cases, creditors have accused the Christian Brothers of insider sales aimed at maintaining their authority over the schools rather than seeking the best possible price for the real estate.

Elliott said in his statement that the timing of the re-purchase fit Palma's "well-known growth-expansion plan, and portions of the properties on Acacia Street will factor into those plans. ... Palma is currently engaged in a fund-raising campaign to solicit funding for the purchase of other properties that are contiguous to the school."

Nonetheless, Pfau said he and other attorneys are preparing to investigate this and other Christian Brothers real estate holdings and sales around the country as plaintiffs' claims pile up.

"The timing of this is an example of why we want to scrutinize these transactions," he said.

Abuse victims have until Aug. 1 to file claims that could allow them to be considered as creditors in the bankruptcy cases. Under a court order, Palma alumni have been notified of their right to add claims to the cases.